With the Supreme Court denying leave to appeal, a recent decision of the Ontario Court of Appeal remains good law – and provides employees a further avenue to accessing the more favourable common law reasonable notice of termination.

Throughout Ontario, in all employment agreements, there is an implied term requiring employers to provide their employees common law reasonable notice of termination. In a general sense, where the Employment Standards Act (“ESA”) only requires limited notice, notice of termination under the common law requires employers to provide roughly one month per year of service, either as working notice, or as payment in lieu of notice. That said, all employers are free to contract out of the common law, or exclude their employees from receiving the more generous common law notice by including a termination clause within the employment agreement.

Fortunately, given that these termination clauses limit the entitlements of employees, the Ontario Court of Appeal over recent years has interpreted the clauses strictly and in line with the principle of contra proferentum – that contractual terms should be interpreted against the interests of the party that requested that a clause be included, which in this case would be the employer. In short, if the termination clause in any way contracts out of the minimum standards codified by the ESA, a court will likely find that the employee is entitled to common law reasonable notice.

Waksdale – What’s in It for Employees?

One such case is Waksdale v Swegon North America Inc, which on January 14, 2021, the Supreme Court of Canada denied leave to appeal. In this case, Mr. Benjamin Waksdale was terminated without cause and, in reliance on the termination clause, Swegon, the employer, only paid Mr. Waksdale his minimum entitlements under the ESA, as opposed to the common law.

So, why is this case relevant? There are two key considerations that favour employees.

• First, if either the with or without termination clause in an employment agreement contracts out of the ESA, courts will invalidate the entire termination clause thereby entitling the employee to the more generous common law reasonable notice of termination. Even if, as in Waksdale, the employer does not rely on the just cause termination provision, but the just cause provision contracts out of the ESA, the with and without cause provisions will be treated as one and will be ousted, leaving the employee’s notice entitlements to be determined by the common law. This in many instances will leave the terminated employee with a greater sum of money to carry them over until new employment is secured.
• Second, if a termination provision states the employee has no entitlements if the employee is terminated for cause, a judge will likely invalidate the entire termination clause thereby entitling the employee to common law reasonable notice. This is because, as the Ontario Court of Appeal affirmed, the regulations under the ESA stipulate that an employee terminated for cause is not entitled to notice or severance only if the employee’s conduct rises to the level of “wilful misconduct” – a high standard that the employer must meet. Once again, this too is another avenue through which employees’ entitlements will be determined by the common law. 

Closing Thoughts

While many pro-employer advocates had hoped the Supreme Court would take up Waksdale, in the end, we are left with a decision of the Ontario Court of Appeal that greatly favours employees by solidifying two ways through which terminated employees can receive higher amounts of reasonable notice of termination.